Europe stocks rise, led by SAP, Credit Agricole

Reckitt Benckiser, L’Oreal upgraded; Portugal jitters continue

MADRID (MarketWatch) — European stocks finished slightly higher Friday after a volatile session, with German software group SAP AG and French bank Credit Agricole SA among the biggest blue-chip gainers.

The Stoxx Europe 600 index (STOXX600) closed up 0.1% at 276.02 after swinging between gains and losses for most of the session.

The index rose 3.1% for the week.

U.S. stocks were solidly higher by the close of European trade, underpinning sentiment.

Europe Week Ahead: Portugal, H&M

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Next week investors will monitor developments in debt-laden Portugal, which is facing a political crisis, while clothing retailer H&M will report earnings on Thursday.

At a summit in Brussels, European Union leaders agreed on funding for the European Stability Mechanism, the new bailout fund that will replace the current European Financial Stability Facility (EFSF) in 2013. However, final agreement on a plan to increase the EFSF’s lending capacity to 440 billion euros was delayed until June.

Stephen Pope, managing partner at Spotlight Ideas, said European markets continue to juggle concerns over Japan, the Middle East and European debt, but he predicts buying in the run-up to the quarter-end next week.

“I want equity markets to get back to asking what does the world need and which companies can provide for the needs,” he said in emailed comments. “Those are what should be bought so I am looking for markets to improve and while jittery, I expect a rush of window dressing for month, quarter and, for some, year end.”
NVS, +0.55%

Credit Suisse said in a note that Oracle and Accenture reinforce its view of a “stronger and longer than expected rebound in applications spending in 2010/2011 that closely mirror the post-bubble recovery of 2004/2005, as corporate IT spending revives.”

In Paris, shares of banking group Credit Agricole (ACA) rose 2%, boosting the CAC 40 index (PX1), which closed up 0.1% at 3,972.38.

Exane BNP Paribas started coverage of Credit Agricole with an outperform rating, citing “significant value” in the shares. It also gave Societe Generale a neutral rating and Natixis (KN) an underperform rating.

Shares of cosmetics group L’Oreal (OR) gained 1.1% after an upgrade to buy from neutral at UBS, which said the shares are the worst-performing in the sector since results in February. UBS said L’Oreal is “better positioned to deliver solid organic top-line growth and margin expansion in the current environment.”

Focus on Portugal

Portugal’s woes increased with a fresh downgrade from Standard & Poor’s overnight that reduced its sovereign debt rating two notches to BBB and kept it on negative watch. The agency said that the government’s loss of a key vote on its austerity package and subsequent resignation of Prime Minister Jose Socrates could “hurt market confidence and heighten Portugal’s refinancing risk.” That came on the heels of a downgrade by Fitch Ratings.

“A bailout may total as much as €70 billion, as credit-rating cuts threatened to deepen Portugal’s debt woes,” said Pope. Portugal’s bonds were under pressure on Friday. Clearing house LCH.Clearnet said those bonds will no long be eligible for delivery in any of its RepoClear baskets from Monday following the recent downgrades.

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